PSX dips over institutional, foreign selling

KSE-100 index loses 782 points, or 0.95% WoW, settles at 81,292

KARACHI:

Pakistan Stock Exchange (PSX) reached an all-time high above 82,000 points during the outgoing week over approval of a $7 billion Extended Fund Facility (EFF) by the International Monetary Fund (IMF), but later profit-taking and foreign investor selling pulled the market down, which lost nearly 800 points.

The market exhibited volatility, largely influenced by political uncertainty and concerns over approval of the IMF loan programme and its stringent conditions.

A key positive development was the IMF's approval of the $7 billion EFF, which would provide much-needed financial support and unlock financing from other creditors as well. While the announcement initially lifted sentiment, apprehensions about the economic reforms linked to the loan contributed to the market's decline.

Day-to-day performance of the market showed that the KSE-100 began the week with selling pressure, dropping over 200 points due to political noise and concerns over foreign selling following the Supreme Court's ruling in favour of the opposition regarding reserved seats.

It recorded a sharp decline on Tuesday as political uncertainty and a weakening rupee heavily impacted investor confidence.

Next day, however, the PSX surged to an all-time high as political calm and anticipation of approval of the $7 billion EFF bolstered investor confidence. The bourse reversed course and fell significantly on Thursday, driven by institutional profit-taking and uncertainty over the government's tax reforms tied to the IMF loan programme.

The market extended its losing streak on Friday, falling by over 350 points amid concerns about the IMF's stringent conditions to eliminate energy subsidies and monitor government spending. The benchmark KSE-100 index ended the week at 81,292 with a loss of 782 points, or 0.95% week-on-week (WoW).

JS Global analyst Wadee Zaman, in his review, wrote that after reaching the all-time intra-day high of 82,906, the KSE-100 lost momentum, ending the week with a WoW decline of 782 points.

Average volumes dropped 17% WoW to 391 million shares. FTSE rebalancing-related outflows continued during the week with foreign selling of $12.5 million, he said.

The analyst pointed out that the week saw a significant milestone as Pakistan's $7 billion EFF was approved by the IMF executive board, with indications that $1.1 billion would be disbursed immediately.

Prime Minister Shehbaz Sharif met the IMF managing director in the US, who commended the reforms undertaken by the government. On the back of IMF news, Pakistan received significant financing assurances from China, Saudi Arabia and the UAE "that go beyond the required $12 billion rollovers in FY25". Additionally, the Asian Development Bank (ADB) stated that the IMF-backed reform agenda would increase Pakistan's economic growth to 2.8% in FY25.

Also, the government was renegotiating agreements with five independent power producers and a draft was expected to be finalised soon, aimed at reducing payments to those entities, the JS analyst added.

Arif Habib Limited (AHL), in its report, noted that the market remained mixed throughout the week, with the key highlight being the KSE-100 reaching an all-time high by surpassing the 82,000 level.

"This surge was fueled by the IMF's approval of the $7 billion EFF. However, some profit-taking later in the week caused the index to decline," it said. Among economic news, the repatriation of profits and dividends in August 2024 increased 188% year-on-year to $135.6 million. The SBP's reserves rose $24 million to their highest level since July 2022 at $9.5 billion. Also, the Pakistani rupee appreciated against the US dollar by 0.05%, closing at Rs277.7.

Sectors that mainly contributed negatively were power generation and distribution (755 points), oil and gas exploration (348 points), technology and communication (111 points), oil and gas marketing companies (106 points) and textile (54 points).

Foreigners' selling continued during the week under review, clocking in at $12.4 million compared to net selling of $23.2 million last week.